To Innovate, Turn Your Pecking Order Upside Down

Here’s an uncomfortable truth about innovation: No matter how great your idea, you can’t deliver breakthrough innovation without breakthrough organizational design. Some companies are great at finding opportunities, diagnosing what customers want, and even designing the perfect offerings to satisfy them. But even if you get all of that right, your effort will fall apart if you build the wrong team to execute.

Most companies take the team building step far too casually. To build the right kind of team, for any breakthrough innovation effort, you have to think, quite literally, as though you are building a new company from scratch. You have to discharge all of your company’s rarely challenged assumptions about how the work gets done and by whom. Rather than throwing a team together based on who is most readily available, you have to build a team that is custom-designed for the task at hand. This may mean inventing new jobs, hiring new kinds of experts from the outside, and rethinking hierarchy.

This last piece — rethinking hierarchy — is both the most important and the most discomfiting step. Most companies have a “power alley” — a function that is the most dominant. These power alleys tend to be very stable, but the hierarchy often needs to be upended within teams built for innovation projects.

For example, consider the publishing industry and its fraught transition to the digital world. The companies that made the transition most gracefully are those that created special teams in which the hierarchy was literally turned upside down. Instead of keeping writers and editors at the top of the pecking order and IT specialists somewhere near the bottom, they created special teams in which internet experts were heavily empowered or even dominant. A crucial turning point early in the evolution of New York Times Digital, the internet unit of the New York Times Company, was an explicit decision to recruit and empower a small army of internet experts: Three out of four New York Times Digital employees had been hired from outside the company.

When Electrolux, the European appliance maker, decided that it needed to push its product line up market, it faced a similar organizational challenge. The company had a reputation for high-reliability, midpriced products that were a bit dull. To move up market, the company created a special team in which market researchers and industrial designers were at the top of the pecking order instead of engineers.

The rising phenomenon of reverse innovation — any innovation that is adopted first in the developing world — presents a similar challenge for many companies. To date, most companies have entered the developing world in a straightforward way. They have taken the products that they have made for home markets, put them in boxes, loaded them on ships, and sent them off to be sold abroad.

That approach has delivered some growth at the top of the market, where customers look similar to those at home. However, it leaves the bulk of the opportunity on the table. Customers in the developing world have different needs — not slightly different, but massively different. You can’t win by making light adaptations to existing products and services. You have to innovate from scratch.

Reverse innovation is going to be particularly difficult for those companies in which the most dominant function is technology, product development, or engineering. In most cases, these companies will need to create special teams that deliberately shift power from those who understand technology to those who understand what customers want, because success at reverse innovation is more dependent on the latter. When Deere & Company initiated the development of a tractor from the ground up for India’s middle market, for example, it created a team that was far more heavily staffed with market researchers than had been the case in the company’s earlier forays into India. As a result, the design anticipated the unexpected ways tractors are used in India — for family transportation, for example.

The main point of this post is that any breakthrough innovation, reverse or otherwise, requires special teams that are custom-built from scratch. When building such a team, be sure to:

Start hiring by asking What skills do we need?, not Who do we know? or Who is available?

Create custom titles and job descriptions, tailored to the task at hand.

Deliberately shift the power structure, as the task at hand requires.

Breakthrough innovation is not just about ideas. It’s about getting unfamiliar work done, and unfamiliar work requires unfamiliar teams.